"Tag manufacturing in India doesn't appear feasible given the low deployment level of RFID"

What are the challenges with respect to RFID tag manufacturing
in India?

The challenge of setting up the required infrastructure in a country like
India for an advanced manufacturing process using semiconductor technology,
poses a big challenge. Specifically, given the low level of investment on the
technology by the business community so far, creating the optimum value chain in
the country is a challenging task.

How feasible is it in India, and how are you tackling that
issue?

Tag manufacturing in India appears infeasible, given the low deployment
level of RFID in the country. However, globally the manufacturing activities are
increasingly shifting to Asia, for cost competitiveness, design and
manufacturing innovation, and India should be open for such opportunities. We
plan to lead the pack by being the first to set this trend in India and firmly
believe that the key to running a feasible manufacturing operation is to address
the global market by offering products of good quality at competitive prices.

What were the factors driving your decision?

Our experience over the last five years of deploying RFID solutions in the
country has taught us that high tag costs act as a deterrent to large-scale RFID
adoption in various sectors. As a product company already manufacturing RFID
readers and antennas, we felt that manufacturing tags shall complement our
existing product line and help improve adoption. We are pretty confident that we
will be opening up new opportunities and applications with our indigenous,
low-cost tags that were non-existent before. This would help open up the market.
Moreover, the global tag market by 2015 is expected to be $10 bn and we believe
that India should vie for a sizeable share in this market. We currently have an
annual production capacity of 100 mn tags and would be scaling our production to
about 500 mn tags by 2012.

How do the cost dynamics work out?

The cost of tags manufactured in India could work out to be quite
attractive. The industry could expect the tag price to be lower by around 45%.
This is primarily due to the high customs duty on imported tags and also a
substantial savings in operations expenses by manufacturing locally. We are
enabling further cost reduction from our innovative and cost-effective antenna
design and manufacturing technologies. We have incidentally launched the first
'Rs 10' tag in India (at high volumes).

What are some of the factors that can work in favor of tag
manufacturing in India?

The biggest driving force is the cost and local design and product support
readily available that will bring a sea change of difference in the pilot
evaluation and project deployment stages. The lead-time for product deliveries
will come down drastically with the presence of local manufacturing, resulting
in quicker execution and completion project cycles.

What are some of the things that India can learn from the other
tag manufacturers, and kick-start manufacturing in India?

We see that the government plays a major role in many countries by building
mandates and enabling RFID adoption, thereby creating local manufacturing hubs.
We see a lot of interest from the government and are getting the much-needed
support. There are also certain strategic "big-ticket" projects
initiated by the government in the RFID space, which would trigger the need for
the establishment of a local RFID manufacturing hub in India.

What are the factors impacting the tag price dynamics?

The chip cost accounts for nearly 50% of the overall tag cost. At the
moment, even the volume uptake on the chip does not qualify for massive price
drops to happen. However, with widespread adoption happening in the near future,
we foresee the prices of the chip going down considerably.

Shipra Arora

shipraa@cybermedia.co.in